There’s no denying that you can’t stop your vehicle from depreciating in value. But there’s a way to minimize the impact of your car’s depreciation rate on your finances.
Calculating Your Car’s Depreciation
The easiest way to calculate your vehicle's depreciation rate is with the help of online tools. Here’s the information you’ll need to have:
- Car’s purchase price
- Current age of the car
- Years you plan to own the car
For example, if you purchase a $25,000 vehicle that’s currently two years old, and you plan to own the car for five years, your average rate of depreciation may look like this:
- Average annual value lost: $2,858.67
- First year depreciation: $3,900.00
- Total depreciation: $14,293.38
- Total depreciation percentage: 57.17 percent
- Value of vehicle at end of ownership period: $10,706.62
Keep in mind that this is only an example and not every vehicle depreciates at the same rate.
When to Buy and Sell
Now that you know the numbers, when is the best time to sell your vehicle or buy a used car?
According to data from Edmunds, the best time to buy a used car is anywhere in years two, three, and four of the vehicle’s life. A vehicle’s biggest drop in value is in its first year, and the three years after the initial drop is considered the “sweet spot” because the depreciation rate slows down dramatically.
This means the best time to sell a vehicle is right before its second steepest depreciation dip – which typically happens in years five, six, and seven. After this drop, a car generally has very little resale value and is typically expected to need lots of maintenance.
Of course, a vehicle's value and depreciate rate depends on many factors, such as the type, make, and model of the car, its mileage, and its condition.
The Bottom Line
Timing is important when it comes to depreciation, which is why it’s important to do the math and research before you buy or sell a vehicle. With the proper planning, a car's depreciation rate may not be as big an issue as you’d think.
If you’re considering getting a used vehicle, but worry about your credit, let Auto Credit Express lead the way. We work with a nationwide network of dealers who have lenders available to work with people in various stages of bad credit. Get started today by filling out our free auto loan request form.